Originally posted on 09/19/2012:

Why is it a fvcked up rule by the IRS to tax you on the loan.

1) you contributed tax free income to a 401 k
2) you experienced tax free growth
3) you took a free loan against your tax free account
4) when taking the loan you got money tax free
5) you didnt repay the loan to your 401k so now the money that didnt get ever taxed is getting taxed.


If the IRS didntdo this ppl would contribute 50% of income to 401k, take out a loan, not repay, and nvr pay taxes.